NEW YORK, FEB. 1 -- News that January's unemployment rate hit a 3 1/2-year high pushed blue-chip stocks lower today, but most stocks rose on a surprise interest rate cut aimed at pulling the economy out of recession.
The Dow Jones industrial average fell 5.70 points to 2730.69. In the broader market, issues gaining value nearly doubled those losing. For the week, the Dow gained 71.28. New York Stock Exchange volume today was a heavy 246.7 million shares.
"These employment figures put the brakes on everyone who thought a recession would be short," said McDonald & Co.'s Alice Sadlo. The Labor Department said the jobless rate rose to 6.2 percent last month, with payrolls outside the farm sector dropping a steep 232,000.
The weak data prompted the Federal Reserve to cut the discount lending rate that it charges banks by a half-point to 6 percent. Several big banks followed the lead by lowering the prime rate by a half-point to 9 percent.
After a three-day run-up in stocks based partly on hopes of a swift turnaround in the economy, news of the big payroll drop triggered sharp profit-taking as bonds soared, and the Dow was off 30 points shortly after the market opened.
But the bulk of stocks did not slide as far as the Dow, and by midmorning the market was well on its way to balancing the job figures against the bullish implications of lower interest rates ahead.
"When you have the type of momentum we've seen since Jan. 17, it just doesn't dissipate easily," said technician Newton Zinder at Shearson Lehman Brothers, referring to the Dow's 227-point gain between the close on Jan. 16 and Thursday's close at 2736.39.
In addition, investors are still willing, on balance, "to look across the valley" of recessionary pressures in the economy, he said, "even though this morning's statistics made that valley seem a little deeper and wider than it has previously appeared."
Among individual stocks, USX traded actively, easing 1 3/4 to 29 1/2 after the company said it will issue separate stock for its steel division.
R.R. Donnelley fell 3/4 to 42 1/4. Analysts at Shearson Lehman and County NatWest lowered their estimates after the company posted flat fourth-quarter earnings.
Campbell Soup added 2 1/4 to 62 7/8. Morgan Stanley initiated coverage of the stock by placing it on the firm's recommended list.
Fleer Corp. added 1 3/4 to 27 1/2. Smith Barney raised its 1991 earnings estimate, citing strong growth in the sports card market.
The Standard & Poor's 500 closed down 0.88 at 343.05 and the NYSE composite lost 0.19 to 187.40, but the the American Stock Exchange index gained 1.49 to 319.03 and the Nasdaq composite rose 3.49 to 417.69.